tifp.dk

Center for Corporate Governance

Phone: +45 3815 2515

Mail: ccg@cbs.dk

Articles

Foundation Ownership, Reputation, and Labour

by Christa Børsting and Steen Thomsen. 11th August 2017.

Foundation Ownership, Reputation and labour

Industrial Foundations as Long-Term Owners

by Christa Børsting, Johan Kuhn, Thomas Poulsen and Steen Thomsen, August 11th 2017.

Industrial Foundations as Long-Term Owners

Foundation Ownership at Novo Nordisk

Af Steen Thomsen, May 4, 2016

Novo Nordisk 09

Foundation Ownership at Kavli

Af Steen Thomsen, Center for Corporate Governance, Copenhagen Business School, 8. October 2015

Foundation Ownership at Kavli

Performance Drivers in Foundation-owned Firms

Af Steen Thomsen og Johan Kuhn, Center for Corporate Governance, Copenhagen Business School, 19. juni 2015

Performance Drivers in Foundation-Owned Firms

Foundation Ownership and Externalities: The Economic Impact of Industrial Foundations123

Af Steen Thomsen, Thomas Poulsen og Johan Kuhn
Papiret blev præsenteret til et seminar ved Center for Corporate Governance, Copenhagen Business School, 5. juni 2013

Foundation ownership and Externalities

Skat ved overdragelse af virksomhed til en fond

Af Susanne Nørgaard, CBS/PwC, Revision & Regnskabsvæsen nr. 4, April 2015

Skat ved overdragelse af virksomhed til en fond

The Demography of Danish Foundation- Owned Companies

Af Jonan Kühn, Steen Thomsen, Center for Corporate Governance, CBS. 2 December 2014

The Demagraphy of Danish Foundation-Owned Companies

The Charters of Industrial Foundations

Af Steen Thomsen og Signe Marie Degn, Center for Corporate Governance, CBS.

2 December 2014

The Charters og Industrial Foundations

Foundation Ownership at Ramboll

Af Steen Thomsen, Center for Corporate Governance, CBS. 16 April 2015

Foundation Ownership at Ramboll

‘Danish Industrial Foundations’ in Beyond Shareholder Value: The Reasons and Choices for Corporate Governance Reform

Edited by Williamson, J., Driver, C., and Kenway, P. (Eds) (2014) TUC, London July

http://www.tuc.org.uk/sites/default/files/BSV.pdf

Capital Structure in Industrial Foundations and their Firms

By professor Ph. D. student Christa Børsting, Research fellow, Post Doc. Johan Kühn, Associate Professor, Ph.D. Thomas Poulsen og  Professor Steen Thomsen, Center for Corporate Governance, CBS.
December 4, 2013

Capital Structure in Industrial Foundations and their Firms

Nordic Corporate Governance and Industrial Foundations

By Professor Steen Thomsen, Department of International Economics and Management Copenhagen Business School
November 4, 2014

Abstract

The Nordic countries have attracted considerable attention in recent years as a benchmark for good governance. However, while the political governance characteristics of the Nordic model – particularly the welfare state – are well understood, its corporate governance characteristics remain elusive to the international audience. This paper therefore reviews the Nordic corporate governance model with special emphasis on a unique ownership structure, industrial foundations (foundations that own business companies). Rather than a meticulous description of details it emphasizes the Nordic model as a mode of capitalism which other countries may learn from.

Industrial Foundations and the Nordic Model III

Industrial foundations in the tax system

By professor Søren Bo Nielsen, CBS.
The paper was presented at the end of August on the international Institute of Public Finance’s 70th Annual Congress i Lugano.

Abstract

This paper attempts to place industrial foundations (IFs in the following; similar to trusts) in the tax system. An industrial foundation is a private foundation that holds a voting majority in a joint stock corporation. These IFs are probably more prevalent in Denmark than in any other country, and the paper starts by reviewing some stylized facts and figures for IFs in Denmark. Thereafter, it recalls basic desires as to the structure and logic in the tax system and demonstrates how they lead to a system akin to the ‘dual income tax’ system which has inspired tax reforms in the Nordic countries and elsewhere. This system implies clear consequences for the taxation of different types of income, labor income and capital income. However, as the outline of the system is based on the premise that “people pay taxes”, industrial foundations, having no personal owners, do not immediately fit in. So what to do? The paper explores the implications of treating IFs as high‐income earners (wealthy individuals) and draws the conclusion that in the current system, IFs are very leniently taxed relative to that benchmark. Lenient tax treatment relative to the norm is regularly interpreted as tax expenditures; the usual recommendation for such indirect subsidies is to render them direct by transferring them from the revenue to the expenditure side of the budget.

Industrial foundations in the tax system

The Governance of Industrial Foundations: Executive and Director Turnover

By Ph. D. student Christa Børsting, Research fellow, Post Doc. Johan Kuhn, Associate Professor, Ph.D. Thomas Poulsen og  Professor Steen Thomsen, Center for Corporate Governance, CBS.
Previous versions of this paper were presented at a seminar at the Center for Corporate Governance, Copenhagen Business School, 1 December 2013.

Abstract

We study turnover among executives and directors in companies owned by Danish industrial foundations, which are held to be long term owners. Executives are members of the management board (direktionen), whereas directors a members of the supervisiory board (bestyrelsen). As expected, we find that both director and executive turnover is lower in foundation-owned companies. Foundation-owned companies are more likely to replace directors, but not executives, when performance is bad (negative profits). Thus, we find some evidence of long-termism in foundation-owned companies.

The Governance of Industrial Foundations – Executive and Director Turnover

The Performance of Danish Foundation-Owned Companies

By Ph. D. student Christa Børsting, Research fellow, Post Doc. Johan Kuhn, Associate Professor, Ph.D. Thomas Poulsen og  Professor Steen Thomsen, Center for Corporate Governance, CBS.
Paper presented at a seminar at the Center for Corporate Governance, Copenhagen Business School, May 2013.

Abstract

We study the relative performance of Danish foundation-owned companies 2000-2012. We find that foundation-owned companies have lower sales growth and accounting returns than other companies, but higher factor productivity and similar rates of productivity growth. Size effects appear to be important in that large foundation-owned firms overperform, while small foundation-owned firms underperform. However, foundation-owned companies also have lower risk (volatility of earnings), and we find no differences in risk-adjusted accounting returns.

The Performance of Danish Foundation-Owned Companies

Industrial Foundations as Long-Term Owners

By Ph. D. student Christa Børsting, Research fellow, Post Doc. Johan Kuhn, Associate Professor, Ph.D. Thomas Poulsen og  Professor Steen Thomsen, Center for Corporate Governance, CBS.
October 8, 2014

Abstract

We study Danish industrial foundations as long-term owners of business companies. We document that foundation ownership is more stable compared to other ownership structure. Moreover foundation-owned companies are more conservatively financed, and they have higher survival rates.

Industrial Foundations as Long-Term Owners

Industrial Foundations in the Danish Economy

By professor Steen Thomsen, February 19, 2013, Center for Corporate Governance, Copenhagen Business School.

Abstract

Industrial Foundations (foundations that own business companies) are found around the world e.g in Northern Europe, Germany, the US and India, but nowhere do they appear to be as economically important as in Denmark. In this paper we review their share of the Danish economy. We find that foundation-owned companies account for 5-10% of the Danish economy depending on measurement. However, they constitute the bulk of Danish stock market capitalization and R&D expenditure, and they also contribute disproportionally to international business activity. Finally the industrial foundations make charitable donations of approximately 0.5% of Danish GDP, primarily to research.

Paper: Industrial Foundations in the Danish Economy

What Do We Know (and Not Know) about Industrial Foundations?

By professor Steen Thomsen, August 8, 2012, Center for Corporate Governance, Copenhagen Business School.

Abstract

Industrial Foundations are foundations which own business companies. They are quite common in Northern Europe, but also occasionally found in other parts of the world. Several well-known companies like the Tata Group, Robert Bosch, Hershey, the Guardian, Aldi or Maersk are owned in this way. Because of their combination of non- profit and for-profit characteristics foundation-owned companies pose interesting questions to current theories of the firm. Can non-profit ownership be economically efficient? Can they derive competitive advantages from their ownership structure? How are foundation-owned companies governed? Such questions are interesting given the economic importance in Northern Europe, but they may also carry more general lessons for corporate governance. This paper surveys the sparse literature and poses questions for future research.

Article: What Do We Know about Industrial Foundations?

Governance of Industrial Foundations

Professor Hansmann and Professor Thomsen presented a paper on foundation governance at the conference on corporate governance after the financial crisis at the University of Oxford (co-arranged with the University of Columbia), January 13-14, 2012.

Abstract

Industrial foundations are nonprofit foundations that own business companies. These entities are not uncommon in Northern Europe and many successful international companies are owned in thus way. Because of their good performance and unusual combination of nonprofit and for-profit entities, they present interesting challenges to theories of the firm. In this paper, we present the first study of the manner in which the foundations govern the companies that they own. We work with a rich data set comprising 121 foundation-owned Danish companies over the period 2003-2008,

We focus in particular on a composite structural factor that we term “managerial distance.” We interpret this as a measure of the clarity and objectivity with which a foundation-owned company’s top managers are induced to focus on the company’s profitability. More particularly, managerial distance seems best interpreted as a factor, or aggregate of component factors, that put the foundation board in the position of “virtual owners,” in the sense that the information and decisions facing the managers are framed for them in roughly the way they would be framed for profit-seeking outside owners of the company. Our empirical analysis shows a positive, significant, and robust association between managerial distance and company economic performance. The findings appear to illuminate not just foundation governance, but corporate governance more generally.

Paper: Virtual Ownership and Managerial Distance: The Governance of Industrial Foundations 

Trust Ownership of the Tata Group

Copenhagen Business School, 22 December, 2011.

Abstract

The Indian Tata Group is one of the largest and most admired business groups in the world. It has 28 listed subsidiaries and more than 80 operating businesses. It has shown strong financial performance and social responsibility for decades. Interestingly, it has a unique ownership structure: the main holding company Tata Sons Limited is majority-owned by charitable trusts. We examine the governance of this remarkable entity. The Trusts own 66% of Tata Sons, the main holding company of the Group, while members of the founding Tata family are very small minority shareholders. The governance structure is characterized by managerial distance between trusts and Group companies. The Trusts are almost exclusively concerned with philanthropy, and according to the Articles of Association of Tata Sons Limited, their governance role is limited to nominating two members to the Selection Committee which recommends the Chairman of the company’s Board of Directors. Group companies are independently managed, but there are significant cross shareholdings and a member of the founding family, Mr Ratan Tata, chairs the Trusts, holding companies and major subsidiaries. Mr. Cyrus P Mistry, Managing Director of the Shapoorji Pallonji Group, a minority shareholder in Tata Sons, is to succeed Mr. Ratan Tata as chairman of Tata Sons in 2012. Trustees in the major Trusts are paid nominal fees of as little as $10 and $20 a year.

Paper: Trust Ownership of the Tata Group
 

Data, method and dissemination

Data

As part of the project we will collect data on industrial foundations in Denmark and internationally. We start with an existing dataset of 122 foundations and foundation-owned companies analyzed by Hansmann and Thomsen (2010).  The project will also seek to make use of international data sources and build a library of literature references, working papers and reports.

Reporting

The project will result in 10 reports and four summary reports, which will be discussed by Danish and international experts and then publicized on this homepage.  We will also organize a series of workshops and seminars with participation by international researchers who will contribute to both research and dissemination.  After further processing,  the reports will form the basis for scientific papers in international journals

Literature

There is legal literature on industrial foundations, which is mainly concerned with foundation law (Kronke 1988, Mikkelsen & Werlauff 2008), and there are some historical studies, for example  Johansen and Monrad ( 2004). There is also a considerable international literature on non-profits (Hansmann 1980, 1996, Fama and Jensen 1983, 1985, Glaeser and Schleife (2001) Glaeser (2003)) and an extensive literature on charitable foundations and philanthropy. But the social science literature on industrial foundations is extremely limited.

A brief summary of the economic literature on industrial foundation ownership is as follows. Thomsen (1996, 1999), Thomsen and Rose (2004) in Denmark, Herman and Franke (2003) in Germany and Dzanzig (2011) in Sweden investigate how foundation-owned companies perform compared to other forms of ownership. They all find that foundation-owned companies have a relatively good performance, which is slightly above or in line with that of other companies. Thomsen (2005, unpublished) finds that foundation-owned companies have a better reputation. Hansmann and Thomsen (2010, unpublished) examine corporate governance in foundation-owned companies and find a positive effect of managerial separation between fund and company on corporate performance.Fleischmann (2001) and Thomsen (2006) examine European and U.S. legislation as the reason for a different distribution of industrial foundations. They find that the limited amount of U.S. foundation- ownership is attributable to a tightening of legislation in 1969.

This brief summary makes it clear that there are many unanswered questions which are not examined in the literature. Our project will shed light on issues like the historical origins, regulation, taxation, governance and performance of industrial foundations (for an overview see  http://www.tifp.dk/en/overblik).